H&E, Koppers garner new ratings

PadraicCassidy

NEW YORK (MarketWatch) -- Analysts at Credit Suisse and UBS initiated research coverage of two newly public industrial companies Monday, citing near-term growth prospects but differing on the value of the shares since the initial offerings in late January and early February.

Both investment banks acted as underwriters for H&E Equipment Services Inc.
HEES, -0.10%
and Koppers Holdings Inc.
KOP, -1.14%
Equity analysts at Deutsche Bank Securities, which acted as a co-manager for the H&E's IPO, also initiated coverage of the company Monday with a hold rating.

H&E is "one of the few pure plays in the commercial construction industry-rents equipment," according to Credit Suisse, which attached an outperform rating on the stock.

"In addition to the recovery in spending on commercial construction equipment, we expect H&E to benefit from the aftermath of Hurricane Katrina. Although difficult to quantify, we expect to see the additional work required in the Gulf region to benefit H&E, as the company has historically been focused on this geographic area," according to the research note.

On Jan. 31, H&E priced 10.94 million shares at $18 each, above its $15-to-$17 range, for its $197 million IPO. Since then, the stock has gained more than 40%.

UBS analyst David Bleustein initiated coverage of H&E at neutral, saying that while Hurricane Katrina could mean $600 million in industry incremental spending on equipment over the next few years, the shares appear fairly valued.

Credit Suisse initiated coverage of Koppers Holdings Inc. with a neutral rating. Koppers, a maker of carbon pitch and creosote products, as well as a provider of wood-treatment services, supplies the railroad and aluminum industries.

"The firm's biggest growth drivers are expansion of the aluminum industry outside the U.S., particularly in Asia, and greater railroad maintenance in North America," according to Credit Suisse's research. Major railroads in the U.S. are expected to replace almost 10% more crossties in 2006 than in 2005, the analysts wrote.

But with a price-to-earnings ratio of 17 times expected earnings in the year ahead, the stock was awarded a neutral rating.

Koppers boasts "significant, advantaged market positions with above average growth prospects," but with a 24% gain since the IPO, appears fairly valued, according to UBS, which also rated the shares neutral.

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